Patel to meet Chidambaram; pitch for sops for auto industry

"I will be meeting (Chidambaram) him in the coming week. I think it is important that the country's entire economy gets a stimulus because auto sector will automatically be a beneficiary of that stimulus," he said.

New Delhi: Minister for Heavy Industries and Public Enterprises Praful Patel Thursday said he will meet Finance Minister P Chidambaram next week and press for providing a stimulus, mainly for the automobiles sector to spur growth in the wake of economic slowdown.

"I will be meeting (Chidambaram) him in the coming week. I think it is important that the country's entire economy gets a stimulus because auto sector will automatically be a beneficiary of that stimulus," he said.

He was speaking to reporters after inaugurating the four-day long 'ACMA Automechanika' show jointly organised by Automotive Component Manufacturers Association of India and Messe Frankfurt from Germany.

Patel said, "I understand the Finance Minister's dilemma. On one side, he has to raise the revenues and on the other side he has to maintain (growth) momentum. It is a delicate issue, I don't want to speak on his behalf..."

"But, certainly, the automobile sector needs some kind of stimulus package. How will it be done and which way is the best one that could be told after meeting the Finance Minister," he added.

In the wake of poor performance by the automobiles industry in the current fiscal, Patel said, there is a need to revive various other projects like infrastructure and power in the country, which are related to auto industry and can build the momentum for growth.

Also, interest rates need to be brought down as it has also impacted the sector's performance, he added.

Passenger car sales in the country declined by 12.5 percent to 1,41,083 units in December last year, the steepest fall in the last four months, due to high interest rates, rising fuel prices and overall slowdown in economic growth.

During April-December 2012, the overall year-on-year growth in domestic sales was 4.57 percent.

As regard to overall automobile exports, they declined by 2.92 percent to 21,86,834 units in during April-December 2012 compared to the same period last year.

The Society of Indian Automobile Manufacturers (SIAM) has revised its sales forecast for passenger cars this fiscal to zero to one percent as against an earlier forecast of 1-3 percent.

To revive the sector, SIAM has suggested that the government reduce excise duty on cars other than small cars to 20 percent and said the duty on 10-13 seater vehicles should be at par with buses that is 10 percent.

SIAM asked the government to provide concessions on identified parts of hybrid/electric vehicles.

Besides, the auto industry wants high taxes on small cars and other vehicles are impacting the growth of the sector.

The taxes are as high as 57-62 per cent in some states, he said adding taxes on cars (other than small cars) are as high as 76-82 per cent in some states.

Asked whether there is a possibility to turnaround other sick companies, Patel said, "There is a clear view one has to take. Either you disinvest or you invest in a company. You cannot disinvest and then say that the company shall be a laggard as there are workers and other issues to be handled."

Referring to Scooters India Ltd (SIL) case, he said, "You cannot be in a state of being in-between. In case of SIL, there was a proposal earlier to disinvest it or find a strategic partner which did not happen. So, the other option was to invest some money in the company to make it an ongoing concern."

"So, it is a decision which has to be taken. You cannot be in a state of indecision," he added.

On January 31, the government approved the Rs 200-crore revival package of ailing Lucknow-based public sector undertaking SIL that includes debt waiver of nearly Rs 112 crore.

The Cabinet had also decided to hike salaries of employees of the two-wheeler maker. Their retirement age has also been increased to 60 years.

Earlier in 2011, the Cabinet had given approval to divesting government's entire 95.38 per cent stake in Scooters India to a private player through strategic route.

But, according to sources, this did not materialise due to perceived political implications.